Homeowners facing foreclosure are subject to more than the loss of their homes. Foreclosure involves the sale of a property that secured a since-defaulted mortgage loan in order to recover money owed on that mortgage loan. Additionally, foreclosing mortgage lenders are often allowed to sue and seek deficiency judgments to help them recover money they lost on the foreclosure. They can seek recovery through garnishment of the wages of their foreclosed borrowers.

Deficiency Judgments

In states that allow for judicial, or court-ordered, mortgage foreclosures, lenders seeking a foreclosure are often allowed to pursue deficiency judgments. Deficiencies in mortgage foreclosures occur when foreclosed properties fetch less than their fair market values or what's owed on them. A mortgage lender looking at a deficiency-after-foreclosure may be allowed to file for a deficiency judgment. A deficiency judgment can be used by a mortgage lender to force its now-foreclosed borrower to repay a deficiency.

Wage Garnishments

Mortgage deficiency judgments are like any other money judgment in that they allow creditors holding them to seek wage garnishment. Using a deficiency judgment, your former mortgage lender will seek to garnish a portion of any wages you're earning in order to satisfy that judgment. Generally, creditors holding money judgments obtain sheriffs' levies, using them to compel a debtor's employer to garnish the debtor's wages. By law, usually no more than 25 percent of a debtor's wages can be garnished at any one time, though.

Eliminating Deficiency Judgments

Though it's a sometimes-extreme measure, bankruptcy can be used to eliminate the debt underlying a mortgage deficiency or other money judgment. Mortgage deficiency judgments are considered unsecured debt similar to most credit card debt. All listed unsecured debts in a bankruptcy filing are normally eliminated once the bankruptcy is discharged. If the debt underlying your mortgage deficiency judgment is eliminated, the lender holding the judgment can no longer pursue you to collect against that judgment.

Other Considerations

Non-recourse states such as California don't allow mortgage lenders to pursue deficiency judgments if they foreclose non-judicially, or without the courts. Additionally, many states only allow mortgage lenders to pursue single collection actions, meaning foreclosure or a judgment lawsuit but not both. Remember; bankruptcy only eliminates the debt underlying a judgment, not the judgment itself. After bankruptcy has eliminated the debt underlying your deficiency judgment, your bankruptcy attorney should work to remove the judgment itself.

About the Author

Tony Guerra served more than 20 years in the U.S. Navy. He also spent seven years as an airline operations manager. Guerra is a former realtor, real-estate salesperson, associate broker and real-estate education instructor. He holds a master's degree in management and a bachelor's degree in interdisciplinary studies.

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Guerra, Tony. "Can You Be Sued or Have Wages Garnished as a Result of a Foreclosure?" Home Guides | SF Gate, http://homeguides.sfgate.com/can-sued-wages-garnished-result-foreclosure-41372.html. Accessed 14 September 2019.

Guerra, Tony. (n.d.). Can You Be Sued or Have Wages Garnished as a Result of a Foreclosure? Home Guides | SF Gate. Retrieved from http://homeguides.sfgate.com/can-sued-wages-garnished-result-foreclosure-41372.html

Guerra, Tony. "Can You Be Sued or Have Wages Garnished as a Result of a Foreclosure?" accessed September 14, 2019. http://homeguides.sfgate.com/can-sued-wages-garnished-result-foreclosure-41372.html

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